Swap (rollover)
The overnight interest adjustment added to positions held past the daily market close.
The overnight interest adjustment added to positions held past the daily market close.
Currencies trade with a two-day settlement, so holding a position past the New York close means rolling it to the next value date. The broker applies a swap: you pay the interest of the currency you are short and earn the interest of the currency you are long, with the net added to or deducted from the account. When your side's rate is higher, swap is income; when it is lower, swap is a financing cost - which is why carry trades exist at all.
Beyond the interest differential, brokers add their own markup, and swaps are tripled on the day that covers the weekend because no market trades Saturday or Sunday. Swap-free (Islamic) accounts remove the interest line entirely and recover the cost elsewhere - wider spreads or fees. If you trade positions longer than a day, the annualised swap belongs in your strategy's cost column, next to the spread.
Worked example
A long position on a pair where the base currency pays 4% and the quote currency costs 1% earns roughly a 3% annualised differential - before the broker's markup. Held for 30 nights, that accrual shows up as a small credit (or debit) on the account each morning.
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